Workers Compensation New Legislation Review: A New Day Is Here

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2 Workers Compensation New Legislation Review: A New Day Is Here Attorney Chris J. Scheldrup The Scheldrup Blades Schrock Smith Law Firm, P.C. is committed to the legal education of the lay public on issues of concern. A knowledgeable and informed public ensures a society that respects the role that law plays in protecting the rights of everyone. The information contained herein or presented orally should not be relied upon as legal advice. This information is for educational purposes only. Anyone seeking legal advice should contact a licensed attorney of their choosing. Please do not distribute these materials without express permission from the Scheldrup Blades Schrock Smith Law Firm, P.C.

3 WORKERS COMPENSATION NEW LEGISLATION REVIEW I. INTOXICATION ( ICA 85.16(2)) An employee could not receive workers compensation benefits if the employee was intoxicated, unless the intoxication was considered in the course and scope of employment Burden was on the employer to prove the employee was intoxicated and the intoxication was a substantial factor in causing the injury Very difficult to prove the employee was actually intoxicated at the time of the incident and the intoxication caused the injury if the injured worker falsely states or refuses to provide an explanation for a positive finding An injured worker is better situated to speak to the source of the positive finding at the time of the accident. The amendment creates a presumption of both intoxication and causal relationship to the injury if the employee has a positive test result for the presence of alcohol or drugs. This includes prescription drugs not prescribed by a medical provider or not taken in accordance with the prescribed use. Employee will be able to rebut the presumption with evidence that he/she was not intoxicated at the time of the accident, or that the accident was not a substantial factor in causing the injury. If the presumption is not rebutted, the employee will not be entitled to benefits. C. How will these changes affect claims handling? Was the employee tested for drugs and alcohol following the incident? If alcohol, did the use arise out of the course of employment? Case: stripper encouraged to drink on the job = in the course of employment If the test is positive, determine all facts relevant to the employee s consumption of alcohol or drugs. For prescription drugs, will need toxicologist opinion that level in system exceeds prescribed use. Best Practices: Determine early whether the accident is the type that could be caused by an injured workers impairment due to intoxication II. NO PRIVATE CAUSE OF ACTION ( 85.18)

4 Workers Compensation Reform Section provides no contract, rule or device shall operate to relieve an employer from its liability to pay workers compensation benefits except as provided for in the act. Attorneys were trying to use this provision to sue employers in district court alleging employers rules or contracts violate this section, entitling employees to tort damages. Workers compensation act meant to be the exclusive remedy for employees with work injuries. B. What has changed with the new or modified statute? The amended section specifically states it does not create a private cause of action. Any lawsuits filed under this section should be promptly dismissed by the courts. III. NOTICE OF INJURY ( 85.23) A. What was the problem the new or modified statute is intended to correct for injuries on or after July 1, 2017? The prior law required an employee give notice of the injury to the employer within 90 days of the date of the occurrence, unless the employer actually knew of the injury, or be barred from seeking workers compensation benefits for the injury. Because it is a defense, the employer has the burden of proving the employee did not provide proper notice. Date of the occurrence of the injury is not defined in the statute. Agency and case law has interpreted this phrase as the date the permanent nature, seriousness of the injury was realized by the employee (date of manifestation) which is next to impossible to prove. The amendment defines date of occurrence of the injury as the date the employee knew or should have known the injury was work-related, nothing more. What this means is if the employee gets hurt at work, the work injury must be reported to the employer within 90 days unless already known by the employer, regardless of the seriousness of the injury. If the injury is not reported within 90 days from when the employee knew or should have known about it, the employer will not be liable for workers compensation benefits. You will now be able to deny a claim if notice is not given within 90 days from the date the employee knew or should have known of the work injury. Unless of course the employer already had actual knowledge of the injury. This is true even if the employee believes they suffered only a minor strain that ultimately is determined to be a serious injury. Procedures for reporting conditions believed to be work-related should be posted. IV. STATUTE OF LIMITATIONS ( 85.26) Prior law required an employee to file a claim for benefits within 2 years from the date of the occurrence, or be barred from seeking workers compensation benefits for the injury. Page 2

5 Workers Compensation Reform Because it is a defense, the employer has the burden of proving the claim is barred by the statute of limitations. Date of the occurrence of the injury was not defined in the statute. Agency and case law had similarly interpreted this phrase as the date the seriousness of the injury was known or should have been known by the employee (date of manifestation), which tolls the statute of limitations even if beyond two years from the initial incident. The amendment defines date of occurrence of the injury as the date the employee knew or should have known the injury was work-related. What this means is if the employee gets hurt at work, the claim for benefits must be filed within 2 years from the date the employee knew or should have known of a work-related injury. If a claim is not brought within 2 years from when the employee knew or should have known of a work-related injury, the employer will not be liable for workers compensation benefits. You will now be able to deny a claim if a claim is not filed within 2 years from the date the employee knew or should have known of the work-related injury. This is true even if the employee believes they suffered only a minor strain that ultimately is determined to be a serious injury. V. TEMPORARY SUITABLE WORK ( 85.33(3)) Claimants challenging temporary work offered as not suitable because of geographic location alone, even though regularly traveled for work (e.g. truck drivers, salesmen, etc ). For traveling employees, like truck drivers, who regularly travel away from home as part of the job, it is reasonable to require a temporary relocation in the event of a work injury to the employer s place of business or location of the employer where the employee has worked. Agency and courts have often invalidated with regularity temporary work offers away from the employee s home despite that regular duties require travel. This prevents an important sector of employers from utilizing the modified work provisions. Also, claimants were rejecting modified work offers with non-profit agencies where the employers could not accommodate modified duty restrictions at their place of business. These employers were also disadvantaged by not being able to take advantage of the modified duty work provision. Additionally, Claimants were rejecting modified work offers for unexplained reasons then offering a variety of complaints at hearing with attorney assistance. This prevented the employer s ability to modify the work offer to address the claimants complaints before hearing. The amendment strikes language requiring temporary work offered be with the same employer. Allows employers to utilize non-profit options Page 3

6 Workers Compensation Reform The amendment adds language creating a presumption that modified duty work offered at the employer s place of business or established place of operation where the employee has previously worked is geographically suitable for employees who travel more than 50 percent. Trucking companies can continue modified duty programs for out of state truck drivers The amendment requires offers of modified work to be detailed in writing, including notice that if refused, no temporary benefits will be paid to the employee. If the employee refuses the offer of modified duty work, the employee must communicate the reason for the refusal to the employer in writing at the time of the refusal. Failure of the employee to communicate the reason for the refusal in writing precludes the employee from raising suitability of the work as the reason for the refusal. All employers should be offering modified duty with these changes Written notice with the specifics of the modified duty work offer, including notice of forfeiture of benefits if refused, must be sent for each and every modified duty work offer. Ensure employee has reasonable time to accept If the employee indicates in writing why he/she deems the modified duty work offer not suitable, employer should evaluate basis for refusal to determine whether offer should be modified. Modified duty work offer does not have to satisfy all of the claimant s requests, just has to be within work restrictions and otherwise reasonable. VI. START OF PPD ( 85.34(2)) The prior statute required PPD benefits to begin at the termination of the healing period, defined as the date the employee (1) returns to work, (2) reaches MMI; or (3) employee returns to work that is substantially similar to the employee s original job. If the employee has returned to work but not reached MMI, the employer is required to evaluate permanent impairment and begin voluntary payments before a final medical opinion on impairment can be given. Employers are forced to guess permanent impairment and may overpay benefits on the claim. The amendment changes the start of PPD to the date the employee is at MMI, and the resulting impairment rate, if any, can be determined using the AMA Guides. No longer have to guess whether permanent impairment exists if employee returns to work but has not reached MMI. Cannot be ordered to pay penalty benefits if voluntary PPD payments are withheld until the claimant reaches MMI and impairment can be determined. Must act diligently in obtaining impairment rating as soon as Claimant is placed at MMI. If you know doctor will take time getting impairment rating, and it is likely permanent impairment exists, still consider voluntary payment of benefits to avoid paying interest. Interest owed from date of MMI, not end of healing period benefits. VII. SHOULDER SCHEDULE ( 85.34(2)) Page 4

7 Workers Compensation Reform Shoulder injuries are the second most litigated work injury in Iowa. Awards sometimes bear no rational relationship to the minimal effect of the injury on employability. Shoulders claims drive up litigation and costs. Bordering states classify shoulders as scheduled members, adversely impacting Iowa s competitiveness. The new legislation adds shoulder to the schedule as a separate body part. The maximum number of weeks for a shoulder is set at 400. Shoulders should now be evaluated as a scheduled injury based on functional loss. Note, shoulder was not added to subsections, stating: The loss of both arms, or both hands, or both feet, or both legs, or both eyes, or any two thereof, caused by a single accident, shall equal 500 weeks and shall be compensated as such; however, if said employee is permanently and totally disabled the employee may be entitled to benefits under subsection 3. Since shoulder was not added, bilateral shoulder claim cannot be the basis of a permanent total disability award. Shoulder also not added to 85.64, Second Injury Fund. Second Injury Fund provides additional compensation for employees who have an existing permanent impairment from a prior scheduled injury and suffer an additional permanent impairment from a scheduled injury. An amendment was introduced in the senate to add the shoulder to section 85.64, but it did not pass. The Second Injury Fund pays out more in benefits than it receives in funds, resulting in assessments against employers. VIII. EVALUATING INDUSTRIAL DISABILITY ( 85.34(2)(u)) Agency practice does not take into consideration the number of working years an employee has left in evaluating industrial disability. Purpose of workers compensation is to provide a wage replacement to injured workers. Awards of industrial disability should not exceed the employee s remaining years to work. Refusal to take into consideration number of working years remaining, PPD awards often provide windfalls to older workers who are near or at retirement age. The amendment requires any industrial disability analysis take into account the permanent partial disability of the employee and the number of years in the future it was reasonably anticipated the employee would work at the time of the injury. Page 5

8 Workers Compensation Reform In evaluating claims, the likely number of working years remaining should be taken into consideration. If the employee is older, the percentage of industrial disability should be lower than a younger employee in a similar occupation with a similar injury. IX. FUNCTIONAL PAYMENT ONLY WITH EQUAL WAGES ( 85.34)(2)(u) Industrial disability awards were not always consistent with employees demonstrated ability to earn wages. For example, an employer accommodated position at the same or higher wages as was earning at the time of the injury. History of large industrial disability awards (greater than 60 percent) despite return to work for same or higher wages. Created as a disincentive for employers to return injured worker back to work. The amended statute provides for non-scheduled injuries, if the employee returns to work or is offered work for which the employee receives or would receive the same or greater wages than the employee received at the time of the injury, the employee shall be compensated based only on the employee s functional impairment resulting from the injury. However, if an employee is thereafter terminated by the employer, an award or agreement for settlement can be reviewed by review-reopening to determine any reduction of earning capacity caused by the employee s permanent partial disability. Prior to payment of any permanent partial disability, determine whether the employer can accommodate the employee at the same or higher wages. Advise the employer if the employee is terminated, additional benefits may be due if the employee files a review-reopening. This section is intended to create an exception to the three year statute of limitation on review reopening proceedings and may result in reopening old files. In some cases functional impairment may be greater than resulting industrial disability. X. AMA GUIDES MANDATORY FOR FUNCTIONAL IMPAIRMENT ( 85.34(2)) Until recent years, functional impairment was determined from expert medical opinions applying the AMA Guidelines. The Agency began supplementing their knowledge and experience with claimants lay testimony to reach higher functional impairment ratings then the AMA Guidelines provided. The result was arbitrary and excessive impairment awards not supported by medical evidence. The new section provides when determining functional impairment, the percentage of impairment shall be determined solely by using the AMA Guidelines. The new section explicitly prohibits consideration of lay testimony or agency expertise. Page 6

9 Workers Compensation Reform C. How will this change affect claims handling. Easier to reserve files Settlement opportunities increase with known parameters of possible awards Claimants less likely to seek attorney representation if adequately understand basis of award XI. NO DOUBLE BENEFITS ( 85.34(x)) The Act was interpreted by the Agency and affirmed by the Supreme Court as allowing simultaneous payment of PPD and PTD benefits in the event of multiple injuries. This is true even if the second injury was a sequela of the first injury, and taken into consideration in determining the disability of the second injury in finding the employee permanently and totally disabled. This resulted in a windfall to claimants by receiving duplicative benefits for the same resulting loss of earning capacity. This new section specifically states PPD benefits shall end upon payment of PTD benefits. It further prohibits an injured worker from receiving PPD benefits if the employee is receiving PTD benefits. Easier to reserve claims when sequela injuries are involved and PTD is a possibility. Reduces litigation related to claimants attempts to receive simultaneous PPD and PTD benefits. XII. CREDIT FOR PPD TOWARDS PTD ( 85.34(3)(b)) For successive injuries, PTD awards were deemed to start on a date certain, and no credit given employers for payments of PPD made during the same time period for prior injuries. This resulted in employees receiving double benefits for a resulting total disability that factored in prior injuries. Further, the previous statute did not take into account prior determinations of loss of earning capacity or functional impairment, resulting in the employee receiving more than 100 percent loss of industrial disability upon a finding of permanent total disability. The amendment provides if an employee has received PPD compensation, the compensation paid shall be deducted from the total amount of compensation payable for PTD. The entitlement for a deduction is no longer limited to PPD paid for the same injury, but has been expanded to apply to PPD paid for any injury. All prior payments of PPD benefits must be identified For purposes of deducting prior PPD awards, the statute does not identify whether the deduction should be from the front end or back end. Because PTD benefits are potentially for life, in order for this provision to have meaning, it is logical to assume benefits should be deducted from the front end. Page 7

10 Workers Compensation Reform XIII. OFFSETS TO PTD ( 85.34(3)(c)(d)) Claimant obtains PTD award, goes back to work earning similar wages as he/she was at the time of the injury, receiving a windfall, and requiring the employer to file a review reopening petition to argue the claimant is no longer totally and permanently disabled. Even then, no ability to recover overpayment of benefits. New section provides an employee forfeits weekly compensation for PTD for any week in which the employee is receiving a payment greater or equal to 50% of the statewide average weekly wage from the following: Gross earnings from any employer Payment for current services from any source The new section also provides an employee is not entitled to PTD benefits while the employee is receiving unemployment compensation. Determine if the employee has received unemployment compensation during any period of time in which PTD benefits are owed. Periodically check on employees awarded PTD benefits by requesting they respond to inquiry regarding earnings. If employee refuses to provide information requested, grounds to suspend weekly compensation benefits until information is produced. If employee is working, obtain detailed weekly earnings information and determine whether the employee earned 50% or more of the average weekly wage. If determined an employee has received earnings in excess of 50% of the average weekly wage, notify employee of forfeiture and resulting credit to be taken for any overpayment. XIV. CREDIT FOR OVERPAYMENT ( 85.34)(4)(5)) Under the previous statute, employers were only entitled to credit for excess TTD payments against PPD payments. This prevented employers from receiving a credit for overpayments against future payments. Overpayments were another cost of the claim because no real recovery against the employee is allowed. The amended statute provides for overpayment of TTD or TPD, the employer shall receive a credit against any future weekly benefits due for any injury to that employee. The amendment also provides for any excess payment of weekly benefits, the employer is entitled to a credit against PPD liability for any current or subsequent injury. Determine if an overpayment has been made. If so, notify the employee in writing of the overpayment and the reason(s) for the overpayment. Notify the employee in the same writing Page 8

11 Workers Compensation Reform Page 9 that employer is entitled to a credit for the overpayment against future weekly benefits, if applicable. XV. APPORTIONMENT ( 85.34(7)) In 2008, the Iowa legislature attempted to change the apportionment rules, by requiring employers to be liable for only that portion of the employee s disability. However, subsequent agency and court interpretation of the amendments ignored the intent of the legislature. As a result, employers were still responsible for fully compensating an employee for all resulting disability, according to the fresh start rule even if the employee had previously received compensation for the same injury. Employers were reluctant to hire or continue employing workers with prior injuries as a result. The amendment makes clear the employer is only liable for that portion of the employee s disability that arises out of the employment with the employer and that relates to the injury that serves the basis for the claim. By striking inconsistent language elsewhere in this section, the amendment also makes clear that an employer is not liable for compensating an employee s preexisting disability from another employer or for causes unrelated to employment. The amendments eliminates the fresh start rule C. How will this affect claims handling. Determine all pre-existing disabilities not related to the current injury Ask the treating physician/ime physician to separate impairment for the injury versus prior disabilities Ask the treating physician/ime physician to distinguish medical treatment needed for the current injury versus claimant s pre-existing disabilities Ask the treating physician to distinguish what permanent restrictions are required for the current injury versus claimant s pre-existing disabilities Perform or locate examinations prior to injury to determine a baseline and then identify changes, if any XVI. Forfeiture of Benefits for IME refusal ( 85.39(1)) The previous statute provided a claimant s weekly benefits were suspended for the period of time he/she refused to attend an IME at the employer s request. The statute had no teeth because once the employee attended the IME whether voluntarily or by agency order, the employee was entitled to receive payment for the suspended benefits. Employers often lost out on pre-payment fees and costs in scheduling and rescheduling IME appointments. B. What has been changed with the new or modified statute for injuries on or after July 1, 2017? The amendment provides that the employee forfeits weekly compensation benefits during the period of refusing to attend an IME at the employer s request.

12 Workers Compensation Reform Employers will not be required to compensate employees with weekly benefits during the period of refusing to attend an IME. Notification in writing of the appointment and the resulting forfeiture of benefits if he/she refuses to attend the IME appointment. XVII. Reasonable IME Fees for compensable injuries ( 85.39)(2)) Claimant s attorneys routinely filed meritless petitions, where either the claim was not compensable, or the employer had already paid out all benefits the employee is entitled. Claimant s attorneys then tried to settle cases for low value in lieu of getting the IME provided the claimant by statute. Claimant friendly IME doctors had significantly increased IME fees due to lack of agency oversight. The effect was to unnecessarily increase litigation and drive up the costs of litigation. The amendment provides an employer is only liable to reimburse an employee for an IME if the injury is determined to be compensable. The amendment further provides a determination of the reasonableness of a fee for an IME shall be based on the typical fee charged by a medical provider to perform an IME in the local area where the examination is conducted. C. How will this affect claims handling? Payment for an IME for questionable claims is not required until the injury is deemed compensable. Pay only a reasonable fee to reimburse claimant s IME provider equal to the typical fee charged in the geographical area it was performed. XVIII. COMMUTATIONS ( 85.45(1)) The previous law allowed an employee to unilaterally request the commissioner to commute some or all benefits in a lump sum. The only requirement was the commissioner must determine commutation was in the best interest of the employee. In reality, awards were commuted routinely when they were not in the employee s best interest. Further, consideration was not given to the hardship created for the employer in requiring the award to be paid in a lump sum. Also, there was no relief to the employer when an employee died or re-employed following a commutation of benefits. The amendment specifically requires consent of all parties for any partial or full commutation. Page 10

13 Workers Compensation Reform The amendment further allows the parties to agree that the employee is entitled to medical benefits under such terms and conditions as agreed to by the parties for a period of time after the commutation. Employers can no longer be forced to commute benefits. For claims in which the employee may need additional medical care, commutation can be accomplished with terms providing additional medical care. XIX. Vocational Rehabilitation for shoulders ( 85.70(2)) This is a new provision providing vocational rehabilitation for employees who suffer shoulder injuries who cannot return to gainful employment. It requires the department of workforce development to evaluate the employee to determine career opportunities in specific fields listed and determine if the employee would benefit from such training through an area community college. If it is determined by the department that the employee is a candidate for the program, the department is to refer the employee to the nearest community college to the employee s resident, or upon agreement between the department and employee, the community college that offers a program that best meets the employee s needs. The program must offer an award of an associate decree or completion of a certificate program and will enable the employee to return to the workforce. Once the referral to a community college is made by the department, the employee has six months to enroll or is no longer eligible to participate. Employers/their insurers are required to provide financial support for the employee s participation in the program in an amount not to exceed $15,000, to be used to pay tuition and purchase required supplies. The community college is directed to bill the employer/insurer for the employee s tuition and fees each semester. The employer/insurer is also directed to pay for the purchase of supplies required by the program, upon receipt of documentation from the employee detailing the cost of the supplies and the necessity for them. The employer/insurer may request a period status report from the college documenting the employee s attendance and participation in and completion of the program. If any employee does not maintain a passing grade in each course in which the employee is enrolled each semester, the employee is no longer eligible for the program. XX. JURISDICTION ( 85.71(1)(a)) Under previous law, a person who regularly worked in another state and was injured in another state could have filed a claim for Iowa workers compensation benefits if the employee lived in Iowa and the employer had a place of business in Iowa. Situations arose when employees and employers lived on the border between two states. This allowed employees to forum shop between states Page 11

14 Workers Compensation Reform The statute eliminates jurisdiction over work injuries that occur outside the state but the employer has a place of business in this state and the employee is domiciled in this state. There are several grounds for jurisdiction over injuries occurring outside the state remaining in the statute. Injuries occurring inside the state are all covered by the statute. Before paying benefits, determine whether Iowa has jurisdiction over the claim following the amendment. Determine employee s residence, employer s place of business the employee regularly worked, location of the accident, where the employment contract was entered, whether the employment contract says designates jurisdiction of a particular state for workers compensation claims XXI. BOND ON JUDICIAL REVIEW ( 86.26(2)) Under previous law, if the case was appealed from the commissioner to the district court for judicial review, there was no procedure in place to stay enforcement of the agency award. As a result, an employer could have been forced to pay out an award, won on appeal, and have no ability to recover those payments made to the employee. The amendment provides filing of the petition for judicial review will stay enforcement of the agency action if the moving party posts a bond within 30 days of filing the petition. The amendment does not specify the amount of the bond, rather it states it shall be a reasonable amount as fixed and approved by the court. The amount fixed by the court for the bond shall be deemed reasonable and adequate unless a party objects to the amount within 20 days. If objected, the court may modify the amount of the bond, and if increased, the moving party has 20 days from the date of the order to post the additional amount. Bond posting for civil judgments is 110 percent, therefore it is likely the district court will set bond on a workers compensation appeal at a similar or higher percentage. XXII. ATTORNEY FEES ( 86.39) Agency precedent had provided it is unethical for an attorney to assert a fee against workers compensation benefits being voluntarily paid by the employer. There is no corresponding law codifying this principle. Without a statutory prohibition against taking a fee on amounts recovered through no effort of the attorney, the ethical principle is unenforceable. Attorneys took cases where no dispute existed and asserted liens on moneys paid despite their ethical obligation. Page 12

15 Workers Compensation Reform The new section codifies the ethical rule and provides that an attorney shall not recover fees for legal services based on the amount of compensation voluntarily paid or agreed to be paid to an employee. It further provides the attorney can only recover a fee on the amount of compensation that the attorney can demonstrate would not have been paid to the employee but for the efforts of the attorney. This new section will afford the commissioner the ability to investigate claims of attorneys taking more fees than entitled. It should reduce litigation in those cases in which benefits are being voluntarily paid as provided by the Act. XXIII. INTEREST ( 535.3)(1)) XXIV. APPLICABILITY The law took effect on July 1, For commutations, no petition for commutations could be filed as of July 1 unless all parties consent. Page 13

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